Challenge to UK and European Union on 'damaging' trade deals

Challenge to UK and European Union on 'damaging' trade deals

By agency reporter

14 Jan 2008

Christian Aid is calling on the British Government to push for a comprehensive review of 'serious, damaging flaws' in trade agreements forced upon a number of developing countries in recent weeks by the European Union.

UK-based international development agency Christian Aid is calling on the British Government to push for a comprehensive review of "serious, damaging flaws" in trade agreements forced upon a number of developing countries in recent weeks by the European Union.

The UK must also take the lead in challenging the way the European Commission negotiates such deals, known as economic partnership agreements (EPAs), to ensure further damaging commitments are avoided, says the organisation.

"Countries were pressurised to agree the deals by threats that they would otherwise face stiff tariffs when accessing European markets," claims Tzvetelina Arsova, Christian Aid’s Africa economic policy officer.

Arsova continued:"The picture that is emerging from the deals is deeply troubling. There are serious, damaging flaws that place major obstacles in the path of economic development for poorer countries.

"The UK Government nearly three years ago raised major objections to the way in which the Commission was pursuing such agreements but then did little to rein in its behaviour.

"As a result, EU mercantilist interests have replaced development aspirations and objectives. In order to redeem itself, the UK government must now show leadership in demanding a fundamental review of the deals signed. As they stand, poor countries will simply get poorer."

Nearly 80 African, Caribbean and Pacific (ACP) countries were put under enormous pressure to sign EPAs to replace trade deals dating back to the colonial era that are not in accordance with World Trade Organisation rules.

The deadline was December 31 2007. The frenetic haste, intense pressure and lack of proper scrutiny of negotiations in a number of parts of the world meant that countries were not able to assess, let alone defend, what would be best for their future development.

Caribbean countries signed up en bloc to comprehensive agreements covering not just trade, but investment and the provision of services. A number of African and Pacific countries refused to sign, saying they needed more time to negotiate, while others have signed interim deals covering trade only.

In the Caribbean, where a full EPA was signed just before Christmas, Shantal Munro-Knight, senior programme officer at the Caribbean Policy Development Centre, based in Barbados, said: "We are very disturbed that the EPA was signed before anyone in civil society was even allowed to look at the text.

"We were given no clear idea of what economic risks our governments have exposed us to, so that we could develop an appropriate intervention strategy.

"We have consistently called for more transparency in the process, but clearly this has not been taken on board."

"Traditionally the Caribbean exported sugar, bananas and other agricultural products to Europe. Now Europe wants us to open up our markets to them. It is not that we are saying we never want competition, but we need some time and investment to build capacity."

An examination of the interim deals signed by a number of African countries reveals that, despite EU claims to be acting in good faith, the effect of EPAs on a number of economies could be devastating. Issues of particular concern to Christian Aid and their partners include:

• Countries that signed had to abandon efforts to establish regional economic integration, an important development strategy. Poorer countries could now find themselves at an economic disadvantage against stronger neighbouring economies. The EU’s insistence on being given 'most favoured nation' status will also make it impossible for those that signed to choose more strategic trading partners in future.

• The interim EPAs contain no provision for the elimination of EU export subsidies or the reduction of other forms of EU agricultural subsidy. Subsidised EU products will be dumped on ACP markets as is already happening in West and Central Africa with poultry, onions, tomato paste and wheat based products.

• The EU has persistently stated that it would allow ACP countries sufficient flexibility to stagger opening their markets – even citing figures of tariff liberalisation of 80% over 25 years. However, countries were not actually given anything like that period to remove protective import tariffs. Mozambique, a least developed country, is required to liberalise 80.5% of its tariffs as soon as the agreement enters into force. Import tariffs are often a much needed source of revenue for many ACP states, and an important tool to protect sensitive local industries and diversify economies.

• Safeguard clauses intended to mitigate any harmful impacts of liberalisation are inadequate. The EU fought hard to reduce by more than 50% the number of 'sensitive' products and industries that East African countries could continue to protect. East African markets will now face increased EU imports of frozen chicken parts, other meat products, dried egg and raw hides and skin. Dried egg imports may well have as deleterious an effect on local egg producers as the import of dried milk has had on Kenya’s dairy industry.
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• Countries that signed interim deals must now reduce, or eliminate, export restrictions, including taxes. This removes another important tool for governments wanting to develop processing and manufacturing plants.

• The interim EPAs contain no mechanism for monitoring and evaluating their impact on economies affected.

Christian Aid says that continuing EPA talks in 2008 present a chance to revisit the damaging aspects of the interim agreements done in haste.

"Contentious clauses and provisions not compatible with the development goals of ACP countries should be opened up for renegotiation," commented Tzvetelina Arsova. "But we also expect that in 2008 EC will push hard for deals in areas of greatest commercial and strategic interest to Europe – such as investment, services and government procurement."

"These issues have long been controversial in trade deals. Their re-emergence in EPAs could deprive ACP governments of the right to manage foreign investment effectively, jeopardising the poor’s access to critical services – such as sanitation and power – and preventing small local businesses and marginalised groups from accessing lucrative public contracts.

"The UK needs to stand firm on its commitment that these topics should be kept out of the remit of EPAs, and it must support the sovereign right of ACP countries to determine their own policies, and steer their own course of economic development and regional integration," added Arsova.